Well yes and no, it’s not as bad as some had feared, however, there are areas to be aware of when planning any R&D spend.
First, the good news – the government’s commitment to increasing R&D spending to £20 billion a year by 2024-25 has been reiterated. This means a real cash increase of around a third compared to 2021-22 and, on top of that, confirmation that the nine UK Catapults will see an increase of 35% in their funding. These steps were agreed to address the shortfall in total R&D spending as a percentage of GDP and, whilst there has been some discussion around how that figure is calculated, it’s refreshing to see this hasn’t diminished the government’s commitment.
If you secure a grant, you can typically secure Research and Development Expenditure Credit (RDEC) on the project. It’s great news for those companies that secure grant funding and the larger companies that benefit from the RDEC scheme because the announcement sees the RDEC rate increasing from 13% to 20% from the 1st of April 2023. Quite a jump considering some of the sums involved, but certainly a welcome improvement to an effective incentive.
It’s not great news if you’re focussed on the SME Tax Credit scheme. From April 2023, the SME additional deduction decreases from 130% to 86%, whilst the SME credit rate will decrease from 14.5% to 10%. This has been proposed to address uncertainties around the meticulousness of some SME R&D claims in recent years. Whilst an amended approach that prioritises integrity is appreciated, it’s unfortunate that this reduction hasn’t been approved in conjunction with an improved assessment approach to weed out fraudulent claims at an earlier stage.
The Autumn Statement has been delivered in extremely challenging times, and the next few years will prove equally testing. So, is now a good time to look at R&D funding?
We were concerned that the balance the chancellor looked to strike would focus too heavily on cuts, however, it has been delivered in a way that still encourages investment in the future which is extremely positive. The incentives will allow companies looking to capitalise on innovation to still benefit from critical support, whilst developing technologies that are ambitious and help drive the UK to the forefront of global innovation.
If you’re looking for support in navigating the current and ever-changing grant funding landscape, get in touch with our team today.